Falling US stockpiles push crude oil to 12-year high

www.theage.com.au February 28 2003 By Rajat Bhattacharya Tokyo

Crude oil rose as much as 2.5 per cent to its highest price since Iraq occupied Kuwait in 1990, after the US Energy Department said the nation's inventories last week fell to their third-lowest level in at least 19 years.

Prices have jumped as much as 7.2 per cent in two days and 81 per cent in a year. US supplies are falling as it prepares for a possible attack against Iraq, saying the oil exporter still has not rid itself of weapons of mass destruction as it promised to do in the 1991 ceasefire that ended the Persian Gulf War. A strike in Venezuela also cut oil supplies.

"The supply situation in the US and parts of Asia is very, very dangerous," said Tetsu Emori, a commodity strategist at Mitsui Bussan Futures. "It's too easy for crude oil prices to reach $US45 ($A74) to $US50 per barrel once a war starts in Iraq."

Crude oil for April delivery rose as much as US94¢ to $US38.64 a barrel in after-hours electronic trading on the New York Mercantile Exchange yesterday - the highest intra-day price since October 1990. Yesterday in floor trading, oil rose 4.6 per cent, to $US37.70 - a 12-year closing high.

Venezuela and Iraq in November pumped about 7 per cent of the world's oil. US oil inventories fell one million barrels to 271.9 million barrels in the week ended February 21, down 14 per cent from a year earlier, the Energy Department said in a weekly report. The level is 0.8 per cent higher than the 269.8 million barrels on February 7, the lowest stockpile level since at least February 1984.

Supplies of distillate fuels, which include heating oil and diesel, dropped below 100 million barrels for the first time since May 2000, and gasoline stockpiles declined for the fourth time in five weeks.

Oil stocks in the Organisation for Economic Cooperation and Development region in December fell to 107 million barrels below the year-earlier level, the International Energy Agency reported earlier this month.

Bloomberg